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Deann Colt, Renter in Kihei, HI

lease option

Asked by Deann Colt, Kihei, HI Mon Jun 28, 2010

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Word association test?

Lease-option . . .

Properly structured, a win-win situation.

Beyond that, if you're trying to find a lease-option property, see a blog I wrote on different ways to do so: http://www.trulia.com/blog/don_tepper/2010/03/how_you_can_fi…

Hope that helps.
0 votes Thank Flag Link Tue Jun 29, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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Deann,

Welcome to trulia...please consider resubmitting your post in a manner that Trulia pros may respond.

You are in the right place to get the information you require.

Good luck,

Bill
0 votes Thank Flag Link Tue Jun 29, 2010
this would be a much easier question to respond to with more information to work with. first, i will define what a lease option includes. an option is essentially a contract between a buyer and seller whether it is a stock or real estate. terms for a future transaction are set in the present. if the buyer is able to perform, they have the right to exercise the option. if they can not then the option expires and becomes worthless. technically an option to purchase could be sold to another buyer if the original buyer can't perform, if it would be a good deal for someone else.

in any event the underlying lease is the basic contract. the end of the lease is generally the length of the term the buyer has to perform the purchase. commonly, the buyer will make a larger than usual deposit as a down payment. they may also pay more than market value with the overage going towards the down payment. the benefit to the seller is obvious, they get more money up front and if the buyer fails to perform the owner keeps the extra money. the risk to each side is in the volatility of price. if the price is set at today's values and the value skyrockets, the buyer wins, but if the price drops and the buyer chooses not to exercise the option, the seller wins. only if the value at the time of the actual purchase is roughly the agreed upon price is it a complete win/win. however there are other benefits included such that the buyer knows that the house can not be sold to another buyer during the lease period, and the seller has the security of knowing that the buyer will probably take better care of the property with the expectation of future ownership.

when the term of the lease is near its expiration date, escrow can be opened and the sale completed.

if the question is specifically what are the chances of acquiring a lease option in albany, that is a really good question. there are a large number of rental homes in albany: 10-20% more than demographically similar cities in the bay area. they rent for more than the average bay area home, largely because of the overall stability of albany, and the excellence of the schools. i am a product of albany schools, therefore, i have a certain bias.

think as if you were a landlord. you own a home that has only suffered a minimal loss while houses in most surrounding cities have lost up to 60% of their value. an owner of more than 5 years, with a newly refinanced loan is probably experiencing positive cash flow. vacancy rates are low, meaning houses rent quickly. if sold, most owners will likely face long term capital gains. would you sell?

your best bet at finding a possible lease option may be to find a house where the owner has recently moved out. they may want to sell before their 3 years are up to capture the tax credit available for those who have lived in their house 2 out of the past five years. i would ask potential landlords how long they have been renting out their houses. your task as a tenant/buyer is likely to be educating the seller as to what the benefit to them will be in selling their home. most owners will not understand the concept well enough to be willing to go forth.

you might offer to build some sweat equity into the house to sweeten the deal for a reluctant seller. then if t you choose not to exercise the option, they come out ahead!

june through sept are excellent months to try and find a new residence in albany.

GOOD LUCK!
0 votes Thank Flag Link Tue Jun 29, 2010
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